David R. Henderson  

Reply to Cardinal Rodriguez Maradiaga

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At a conference titled "Erroneous Autonomy: The Catholic Case Against Libertarianism," Cardinal Oscar Rodriguez Maradiaga attacked the free market, calling it "a new idol."

This is my response. I understand that in writing it, I am assuming that in each case the reporter who covered Cardinal Rodriguez Maradiaga's talk is quoting him accurately. If that turns out not to be the case, then my apologies to the Cardinal. Every time I quote the Washington Post article, I'll put it in the colored box.

The pope, Rodriguez Maradiaga said, grew up in Argentina and "has a profound knowledge of the life of the poor." That is why, he said, Francis continues to insist that "the elimination of the structural causes for poverty is a matter of urgency that can no longer be postponed."

That makes sense. Argentina has a lot of poverty. Unfortunately, it doesn't have a lot of the free market. Although about a century ago, Argentina was among the leaders of the world in per capita GDP, decades of Peron-type policies--price controls, cronyism, redistribution etc.--have hurt Argentina's economic growth. So it's hard to see how the Pope's experience would support non-free-market policies.
Instead, he said, solidarity with the poor, as envisioned by Catholic social teaching, calls for "dealing with the structural causes of poverty and injustice." The cardinal stressed that the church "by no means despises the rich," and he said Francis "is also not against the efforts of business to increase the goods of the earth."

Good. That's a good start. So what are the structural causes of poverty and injustice? One way to tell would be to look around the world and see where the greatest poverty is. A large amount of it, percentagewise, is in Africa. The problem in Africa is not that there's too much capitalism, too much economic freedom. The problem is the opposite.
Trickle-down economics, he said, is "a deception," and he declared that the "invisible hand" of the free market -- the famous theory advanced by the 18th-century philosopher Adam Smith -- was instead being used as a cruel trick to exploit the poor.

His first clause is absolutely correct. "Trickle-down economics" is a deception. But the ones who are guilty of the deception are people on the left. They are the ones who use the term and probably coined the term. I know of no free-market economist who uses that term. And the reason we don't is understandable. What the free market really produces is gush-down economics. The incentive to save, invest, invent, and innovate has given poor people enormous wealth. Karl Marx acknowledged the wonderful results of free markets in the 19th century and Brad DeLong acknowledged and celebrated them in the 20th century. As for the the invisible hand being used to exploit the poor, that's possible. There are many charlatans around. It's quite conceivable that some of them have argued for their cronyist policies by hijacking Adam Smith.

Karl Marx wrote that the bourgeoisie was:
...the first to show what man's activity can bring about. It has accomplished wonders far surpassing Egyptian pyramids, Roman aqueducts, and Gothic cathedrals; it has conducted expeditions that put in the shade all former Exoduses of nations and crusades.... 
[It has], during its rule of scarce one hundred years...created more massive and more colossal productive forces than have all preceding generations together. The subjection of nature's forces to man, machinery, the application of chemistry to industry and agriculture, steam-navigation, the railways, electric telegraphs, the clearing of entire continents for cultivation, the canalization of rivers, the conjuring of entire populations out of the ground-what earlier century had even a presentiment that such productive forces slumbered in the lap of social labor? 
 (Quoted in Brad DeLong, "Cornucopia: The Pace of Economic Growth in the Twentieth Century," NBER Working Paper #7602, March 2000.)

And yet, points out DeLong:
Karl Marx was dumbfounded at the pace of the economic transition he saw around him in the middle of the nineteenth century. Yet compared to the pace of economic growth in the twentieth century, all other centuries--even the nineteenth century that so impressed Karl Marx--were standing still.

"But now they are trembling before the book of Piketty," he said with a laugh, referring to the controversial best-seller on the wealth gap by the French economist Thomas Piketty. "At least it is making them think," he added.

I don't observe trembling as much as I observe disagreement. People like Larry Summers have criticized Piketty's underlying model. People like Phil Magness and Chris Giles have criticized his data. And Robert Solow, the founder of modern economic growth theory and one of Piketty's most prominent defenders, points out that if Piketty gets his way with tax policy, real wages will stagnate. So the people whom Piketty should have trembling are the poor and middle-class. The stagnating wages that would result from Piketty's preferred policies would substantially decrease their chances of becoming better off.

Final thought

On one hand, we libertarians could play "ain't it awful" that Catholic University held a conference explicitly devoted to attacking libertarianism. But with my glass-half-full way of looking at things, I see this differently.

First, I think it's wonderful that some prominent people see us as important enough to attack. When I became a libertarian in 1968, we used to joke that all the libertarians could have a conference in someone's living room. We've come a long way, baby.

Second, notice how tone-deaf and uninformed the Cardinal is. It's always a good sign when those who attack us show little understanding of history or economics. It's an especially good sign when that happens at a conference where people who present had a fair amount of time to put their presentations together. If that's all they've got, then the struggle should be easier than I had thought.


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COMMENTS (25 to date)
Mike W writes:

"Karl Marx acknowledged the wonderful results of free markets in the 19th century and Brad DeLong acknowledged and celebrated them in the 20th century."

Is there a link to the DeLong acknowledgement/celebration?

Mike W writes:

Never mind...found it.

I guess these priests haven't heard that, 'Thou shalt not covet....'

Iain Pears has one of his characters in his novel Stone's Fall, say;

A few months ago I read a book by Karl Marx on capital. Elizabeth gave it to me, with a smile on her face. A strange experience, as the author's awe exceeds even my own. He is the first to understand the complexity of capital and its subtlety. His account is that of a lover describing his beloved, but after describing her beauty and the sensuality of her power, he turns away from her embrace and insists that his love should be destroyed. He could gaze clearly into the nature of capital, but not into his own character. Desire is written in every line and paragraph of his book, but he does not see it.
John Jenkins writes:

I think the bit about trembling just reflects the strange modern belief that disagreement is always out of fear (giving us words like homophobia, whose meanings don't quite line up with their structure). Disagreement can't just be disagreement, but has to arise from some other, base motive. It's a poor form of argument, assuming as much as it does, but I think it explains the Cardinal's statement, even if it is uncharitable.

ThomasH writes:

Finding fault with the economic sophistication of a Cardinal (although probably no worse than a member of the board of directors of any other multinational corporation) is shooting fish in a barrel. My favorite example is Timothy Cardinal Dolan thinking that not letting employers decide what is covered by employees' health insurance, which is just part of their compensation, violates the employer's religious liberty.

David R. Henderson writes:

@ThomasH,
My favorite example is Timothy Cardinal Dolan thinking that not letting employers decide what is covered by employees' health insurance, which is just part of their compensation, violates the employer's religious liberty.
I think it does violate the employer’s religious liberty.

TMC writes:

ThomasH, while I agree with your point, your example is unusually poor.

ThomasH writes:

@David Henderson
I think it does violate the employer’s religious liberty.

How does that work?

As I see it, the health insurance purchased is just part of the employee's compensation. It's a historical accident that until ACA the only way employees could receive a subsidy for the purchase of their health insurance was if the employer took some of their wage and purchased an insurance policy for them.

In that unfortunate situation I'd say the employer has an obligation to minimize the cost of his involvement by acting as the employees' agent to the best of his ability. His role as subsidy conduit does not create a right for him to have a religious view about which services are covered by the policy.

We probably agree that there should be no obligation and no subsidy for employer purchased health insurance, but so long as that system exists, I cannot see a legitimate interest, except as a fiduciary, of the employer in the content of the employee's health insurance.

I take Dolan's error to be naive in that that he thinks the employers is giving the employee something in the same way that some people do not understand that the employer's "share" of the payroll tax is part of the employee's compensation and is paid by the employee as much as the employee's "share."

Radford Neal writes:

@ThomasH:

Let's apply your argument in a closely analogous case. Suppose that companies can deduct as a business expense any amount of alcoholic beverages provided for free to employees on the work premisis (as may well be true, I don't know...). Would it violate the religous freedom of a muslim or Mormon employer to require them to take advantage of this opportunity to increase the total compensation for their employees? Does their religous opposition to drinking count for nothing?

As a Canadian, the controversy in the US about requiring that women receive free contraceptives strikes me as strange. They don't get them for free in Canada (unless their employer covers them as part of a supplemental health plan, which is optional). Do they get them for free in other countries? I don't know, but I don't see any principle that would justify the policy. But in the US, some see it as such a clear necessity that religious freedom objections should be set aside?

Carl writes:
Maradiaga...also argued that personal charity was insufficient to solve global problems.

Hey, at least the guy acknowledges that social welfare schemes ≠ charity.

Slightly odd for a cardinal to be having a go at Christian virtues though. Jesus promoted charity, sure, but what did he know?

Pajser writes:

Argentina is not poor country. They are about as wealthy as Germany or Sweden was in middle 1970's. They can guarantee good living standard for everyone. If they still have any problem with poverty - it is up to distribution.

Sam Haysom writes:

One thing to keep in mind about the Catholic Church is that unlike most people who attack libertarianism, the Church has explicitly denounced communism and socialism as products of envy. None of the center-left "good idea implemented badly" equivocations but rather out right denunciation.

I'm little confused as to where the tone-deafness and ignorance comes in. I think this touches on a misunderstanding prominent among libertarians. To the extent that libertarianism is rising in popularity it is driven by two developments (rise in support for drug legalization and opposition to American foreign policy) neither of which is related to libertarian economics which are possibly as unpopular as ever. Because of the rise of liberaltarianism and the shifting focus of libertarians press coverage has gotten more positive and certain segments of the youth vote more receptive this is only because a shift in focus not because anyone is more open to economic libertarianism.

For this reason I think it shows a tactical deftness for the church to attack libertarians of which few are Catholics rather than the rich of whom quite a few are Catholic as seen with Frank Lagone's recent publicized frustration with Francis. Rather than a sign of strength as Mr. Henderson takes this conference to be I think he should be wary. This is a symptom suggesting that economic libertarianism is at its weakest point since before the Reagan administration (it's lowest point probally being when a Republican president instituted price controls). The difficulty of the struggle can hardly be gauged by the response of the church when compared to the much more formidable to name just one adversary mainstream media.

A cynical view might intercept this conference as an attempt to pacify catholic billionaires like Langone by identifying libertarianism rather than rich people as the target of the Pope's economic pronouncements.

Mr. Econotarian writes:

According to the Index of Economic Freedom, there is little economic libertarianism in Argentina:

"Argentina’s economic freedom score is 44.6, making its economy the 166th freest in the 2014 Index...Over the 20-year history of the Index, Argentina’s economic freedom has plunged to “repressed” status."

"Eight of the 10 economic freedoms have deteriorated because of policies that include harsh capital controls, price fixing, restrictions on imports, and a series of nationalizations.

The state’s interference in the Argentine economy has grown substantially since 2003, accelerating the erosion of economic freedom. Institutional shortcomings continue to undermine the foundations for lasting economic development. The judicial system has become more vulnerable to political interference, and corruption is prevalent. Regulatory pressure on the private sector has continued to rise, with populist spending measures and price controls further distorting markets."

"In 2013, facing a deteriorating balance of payments, the government imposed draconian bans on foreign-currency transactions to protect dwindling dollar reserves. It also passed a law attempting to weaken the judiciary, already vulnerable to corruption. Protection of copyrights and patents is problematic. The government has seized private property and manipulates official inflation statistics to reduce interest paid to bondholders."

"Regulatory encroachment on private businesses continues to increase, with government interference discouraging entrepreneurship and raising regulatory uncertainty. The labor market lacks flexibility, and the minimum wage has been rising. The government manipulates official inflation statistics; regulates prices of electricity, water, and gasoline; and pressures companies to fix prices and wages."

"Argentina has a 5.6 percent tariff rate. The government’s policy of “import substitution” is one of many non-tariff barriers to trade. Investment rights are poorly protected. The financial sector remains subject to government interference. Twelve state-owned banks account for over 40 percent of total bank assets, and the presence of foreign banks has fallen in recent years."

By the way, on other "Libertarian" issues:

Argentina still has a drug war.

Abortion in Argentina is strictly limited by law.

The regulation of guns in Argentina is categorised as restrictive - only licensed gun owners may lawfully acquire, possess or transfer a firearm or ammunition, Applicants for a gun owner’s license in Argentina are required to prove "genuine reason to possess a firearm"

On the other hand, same-sex marriage in Argentina has been legal since 2010.

Carl writes:
On the other hand, same-sex marriage in Argentina has been legal since 2010.

Obtaining a marriage certificate from the state has nothing to do with liberty.

Tom West writes:

To understand the attacks, I think it helps to reverse the situation.

If I attack communism by pointing out Stalinist Russia's flaws, a communist may well point out that Stalinist Russia wasn't communist by any stretch of the imagination, and I could reply that an attempt to adopt "true communism" will always devolve into something pretty awful, so my attack on communism is valid.

Attacks on Libertarianism are much the same. The attackers cannot conceive that Libertarianism in the presence of human beings won't devolve into crony capitalism and even outright fascism, so attacking Libertarianism by what is seen as its inevitable outcome is legitimate in their eyes.

Greg G writes:

There is no reason anyone should be surprised that the teachings of the Catholic Church in particular and Christianity in general are entirely antithetical to libertarian ideas.

The teachings of Jesus were based on the idea that the Judgment Day is coming sooner rather than later. In that context, immediate charity toward the poor makes a lot more sense than long term economic investment. It makes more sense as a way of helping them because the world might end soon. It also makes a more sense as a way of working toward your own salvation. The Bible has many examples of Jesus being immediately generous with the poor. And no examples of him making long term economic investments.

Libertarians tend to dislike centralized power. An all powerful God is quite literally the most centralized power imaginable.

Libertarians tend to dislike the idea that they are required to do anything other than avoid aggression against others. Christianity comes with a lot of requirement that go far beyond avoiding aggression against others.

Finally, and most important, libertarians are opposed to violent coercion. The threat of burning in hell for all of eternity is quite literally the most violent form of coercion imaginable.

I am a commenter writes:

Tom West makes an extremely important point.

It's one thing to advocate the endpoint you want to arrive at.

It's an entirely different thing to have good practical insight into: 1) how to get there, and 2) how to keep it that way.

Libertarian criticism of policies we oppose ought to also have lots of emphasis on those two things. In terms of persuading people, you do need to emphasize the morals and principles too, but it'll do no good if you can't make it work.

I am a commenter writes:

Greg, the new testament advises that government is a sideshow, lacking any special inherent moral goodness, that Christians are supposed to tolerate but not worry about too much. The old testament sees kings as a folly and portrays the ancient Jews as being deluded and untrue to themselves for ever desiring them.

Regarding charity, it's important to note that forced charity is not considered a virtue in the new testament . In fact, charity done to impress people is supposed to nullify the virtue in it, according to Jesus. The parable of the talents is often interpreted to mean that we should try to make virtuous and productive use of whatever gifts we are fortunate enough to have.

The new testament is generally seen as not mandating any particular laws about ANYTHING on the part of the state. The usual Christian perspective is that the Mosaic laws of Deuteronomy, Leviticus, and Numbers do not apply to Christians who aren't descended from tribes of Israel (there is a LOT of misunderstanding on this point).

Orthodox Christianity seems compatible with a libertarian system of law and government, just that Christians will impose additional commandments on themselves voluntarily.

Greg G writes:

commenter,

As for your idea that the New Testament means that Christians are "supposed to tolerate" and not worry too much about government how do you think libertarians are doing on that front? It seems to me they tend to worry about government more than anyone else.

You say "The new testament is generally seen as not mandating any particular laws about ANYTHING on the part of the state." And yet I hear all the time that Christianity requires we use government to pass and enforce certain laws prohibiting abortion for example.

You may view that as an exception to the more general pattern (in which case let's reduce the word "ANYTHING" to lower case) A longer view of the history shows that, for most of it, the church thought it's role was to be all mixed up with civil law. Keeping the church out of civil law is a relatively new idea that came to prevail despite the opposition of the church. The increasing popularity of secular points of view had everything to do with that.

You say, "Orthodox Christianity seems compatible with a libertarian system of law and government, just that Christians will impose additional commandments on themselves voluntarily."

Well, yes only if by "voluntarily" you mean "under threat of horrible eternal punishment."

ThomasH writes:

@ Radford Neal:

I think a better analogy would be that for some reason firms are required to provide their workers vouchers for purchase of food as a portion of the wage. Should it be permissible for -- choose your example -- a New Age/Muslim employer to prohibit expenditure of the voucher on GMO food/alcohol?

Whether contraception or any other specific service should be covered by publicly subsidized health insurance with no out-of-pocket cost is a separate issue. I suppose, keeping the subsidy element constant, it would depend on one's view of the elasticity of pregnancy and it's cost to the plan wrt the out-of-pocket cost of contraception.

R Richard Schweitzer writes:
"the elimination of the structural causes for poverty is a matter of urgency that can no longer be postponed."

There are no "structural causes for poverty."

"Poverty," mere subsistence or less, even the failures of subsistence have been the beginning and end of much of human existence and experience. It has always been the beginning.

Sufficiency, which is the displacement of mere subsistence and of poverty, has been accomplished through human interactions with one another and their surroundings.

Where the conditions for those interactions have been optimal and occurred in the greatest conditions of freedom, abundance has accompanied sufficiency.

History is replete with examples of "structural obstacles" that have limited those conditions of freedom of interactions which could produce the sufficiency to displace poverty. They are with us everywhere today.

The "urgency" is to remove the structural obstacles to freedom of human interactions, without political direction or ideological determinations, before mankind's faith in its given nature to produce sufficiency is further weakened, requiring longer and harder efforts to regain the power of that nature.

Radford Neal writes:

@ThomasH

"I think a better analogy..."

Why do you think this is a better analogy? If you mean that in your view it is a better argument against your own position than the analogy I gave, then thanks. If the reverse, then don't I get to pick the analogy I use to make my point?

Gen von Berne writes:

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Adam writes:

@Radford Neal:

Let's apply your argument in a closely analogous case. Suppose that companies can deduct as a business expense any amount of alcoholic beverages provided for free to employees on the work premises (as may well be true, I don't know...). Would it violate the religious freedom of a muslim or Mormon employer to require them to take advantage of this opportunity to increase the total compensation for their employees? Does their religious opposition to drinking count for nothing?

It's interesting you bring this up, because it is a real deduction. Companies can deduct "any amount of alcoholic beverages provided for free to employees on the work premises". I know this as an employer in Utah who does provide this benefit. One of the three company owners, and CEO, is a Mormon. In fact, not 10 minutes ago I availed myself of the company liquor cabinet for a small glass of (tax deductible) cinnamon whiskey, as could any of our employees.

There are many, many tax loopholes that could be seen to violate someone's "religious liberty". That all being said, I think that the employer's tax incentive for health insurance should offend an employer's sense of logic much more than it should their religion.

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